28A — July 17 - 30, 2015 — M id A tlantic
Real Estate Journal
www.marejournal.com
F inancial D igest
NAR Survey finds like-kind exchanges promote new jobs and economic growth
NorthMarq Capital negotiates $1.15 million refinance NorthMarq arranges $13.5m refinance of Charleston Pines
from tax deferment allowed them or their clients to invest additional capital and make improvement in their acquired properties; these investments are generally responsible for the creation of new jobs, such as in construction and property management. According to the survey, in 68% of like-kind transactions, Realtors acted as a broker or agent, and 24% participated as an owner or investor in the transaction. A larger percent- age of commercial members (76%) reported engaging in a like-kind exchange transaction compared to residential mem- bers (45%). Of the total, 40% participated in between 1 and 3 transactions, and 23% partici- pated in 4 or more transactions. Residential properties com- prised the largest portion of recent deals, accounting for 27% of disposed properties and 24% of acquired properties, fol- lowed by apartments (17% of dispositions and 22% of acqui- sitions). Land assets accounted for 19% of dispositions and 17% of acquisitions; retail properties accounted for 8% of disposi- tions and 13% of acquisitions; and office buildings comprised 11% of dispositions and 10% of acquisitions. Investors tend to hold on to their properties for several years; 47% of respondents re- ported their holding period was between 5 and 9 years, and 27% indicated a holding period of 10 to 14 years. “Like-kind exchanges help in- vestors more efficiently allocate capital and resources with less borrowed money into new in- vestments that drive economic activity in communities across the nation,” said NAR president Chris Polychron , executive broker with 1st Choice Realty in Hot Springs, Ark. “Any tax reform plan repealing like-kind exchanges would hurt investors and small businesses, increase financial leverage, weaken growth and the economy, and result in the loss of jobs.” Survey respondents indi- cated that repealing like-kind exchange tax provisions would reduce equity in real estate; 67% indicated repeal would lead to a large increase in fi- nancial leverage. Realtors said the negative result would be reduced purchase money and new construction loans, and increased property holding periods. 96% of Realtors also said real estate values would decrease if like-kind exchange provisions were repealed. n
WASHINGTON, DC —Real estate like-kind exchanges are an important vehicle for dispos- ing of and acquiring proper- ties and support the nation’s financial growth, job creation and economy, according to a new report from the National Association of Realtors . The Like-Kind Exchanges: Real Estate Market Perspec- tives 2015 survey of NAR’s commercial and residential members found that real estate investors and commercial prop- erty owners place a very high priority on current like-kind ex- change tax rules; 40% indicated that transactions would not have occurred in the absence of the tax provision, and 56% said even if the project would have occurred it likely would have been smaller in scale. Realtors are active partici- pants in like-kind exchanges; 63% of Realtors participated in a like-kind exchange transac- tion between 2011 and 2015. The survey found that like-kind exchanges in which Realtors participated created between 10 and 35 new jobs. “Like-kind exchanges that allow investors and businesses to defer capital gains taxes on the exchange of similar proper- ties bring great advantages to investors, real estate markets and the economy,” said NAR Chief Economist Lawrence Yun . “Realtors and their clients often look for better economic use of existing properties that are underutilized, which helps promote local economic devel- opment and increase the na- tion’s gross domestic product.” Internal Revenue Code Sec- tion 1031 provides individuals and businesses with critically needed tax deferment on gains after the disposition of a prop- erty as long as the proceeds are reinvested in a similar property through a like-kind exchange. Replacement properties must be identified in 45 days and the transaction completed within 180 days. Survey respondents said the primary reason that they or their clients participated in a like-kind property exchange, aside from the deferral of capi- tal gains taxes, was for equity to acquire additional proper- ties. Other reasons were for estate planning, portfolio di- versification and completion of a development project. The tax savings resulting from like-kind exchanges are also helping bring more capi- tal into local markets. 86% of respondents said the savings
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INCINNATI, OH – Susan Branscome , managing director
of NorthMarq Capital ’s Cincinnati office finalized the $13.5 million refinance of Charleston Pines, a 243-unit multifamily property located at 1700 Charleston Court in Florence, Kentucky. The transaction was structured with a 10-year term and 30- year amortization schedule. NorthMarq arranged financ- ing for the borrower through its correspondent relation- ship with a life insurance company. BOSTON, MA — Ed Riek- stins , senior vice president of NorthMarq Capital’s Boston based regional office arranged the $1.15 million refinance of MLK Manor Apartments, a 45 unit multifamily property located at 2027 and 2033 Dr. Martin Luther King Jr. Ave. in Mobile, Alabama. The transaction was structured with a 10-year term and 30- year amortization schedule. NorthMarq arranged financ- ing for the borrower through its seller-servicer relationship with Freddie Mac. “The borrower’s coopera- NEW YORK, NY — East- ernUnion Funding , a top-ten commercial mortgage broker- age firm and one of the fastest growing in the nation, show- cased its strength in June, with a record 117 deals in process and 400 new loan submissions. Purchases accounted for over 25 percent of the loan applica- tions, followed by robust retail and office sector activity. The number of acquisitions for June 2015 was one of the highest recorded in a sin- gle month for Eastern Union Funding. This was in large part due to its recently rolled-out Equity Division. Eastern Union closed deals throughout the five boroughs of New York City, in its Maryland branch’s Mid-Atlantic region and throughout the nation. Two blocks fromNYC’s Yankee Stadium, an Eastern Union loan financed the construc- tion of a 60-key Best Western flag hotel, and in Dallas-Fort Worth, the company closed $8 million for the purchase and renovation of a distressed commercial asset in just three
1700 Charleston Court
MLK Manor Apartments
tion and assistance was a key factor in the success of the transaction,” said Riekstins.
“Freddie Mac’s small balance loan program was a great fit for this deal.” n
New equity division drives record numbers for EUF in June 2015
weeks. Closings extended into a variety of sub-markets in- cluding Tulsa, Tampa and Kansas City. The Equity Division, which creates relationships between purchasing clients and high net-worth individuals vetted by Eastern Union, has been praised for catering to a long under-served market niche. “Since launching our Equity Division less than two months ago, we’re getting tremendous response from buyers inter- ested in accessing our vast network,” said president of Eastern Union Funding, Ira Zlotowitz. “The equity platform is resonating with the real es- tate market.” “Eastern Union’s experience adds exceptional value and the firm truly has a well-defined process tailored for success. The equity partner that they brought to the table for Blue Ocean is a perfect example of the solid work Eastern does.” said Jonathan Ehrenfeld, pres- ident of Blue Ocean Realty, a large real estate investment and management firm based
in the Mid-Atlantic region. Blue Ocean, which owns andmanag- es over 2,500 multifamily units and two million square feet of commercial space, closed on a purchase in June 2015 with a Limited Partner investor introduced by Eastern Union’s Equity Division. Eastern Union owes its re- cord month and consistent growth not only to the success of the new division, but to the thought leadership of its elite brokers and a technology platform created to foster mar- ket efficiency, innovation and custom-tailored loan solutions. As the company continues to raise the bar, Eastern Union is playing a key role in chang- ing the commercial mortgage brokerage landscape. “Clients have long wanted to invest in products that are in line with their own capital threshold. Our goal is to listen and in- novate based on their specific needs,” Zlotowitz said. “Our June numbers reflect the mar- ket potential of that philoso- phy. We listened.” n
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